Self-employed with budding CIC business, business/private debt - Payplan options

diekleinemue

Hello,

I'm back... *feeble wave*

I shall catch you up on what happened in the last 3 and 1/2 years later, but right now I am looking for input and advice from people in a similar situation.

I am self employed and have built up my small business from two-weekly sessions in my dining room to a small shop which I rent under extremely exceptional circumstances (i.e. after nearly a year rent-free in exchange for cleaning up and renovating the basement for me to use I now pay £25/week, no business rates, community effort to set it up/paint it/etc., freebies and eBay bargains to kit it out, and it has an ever-growing and renewing user base attending 6 days/week sessions and workshops, part of which I provide, some are run by others. It is also finding recognition amongst local government and health-care providers and I need to invest a bit into finishing the basement to use it and also write funding applications to Big Lottery, Awards for all, etc. to get money for specific community based projects.).

Initially set up as ltd I need to change it into a CIC and have recently found out I can just let the ltd "die off" and start afresh as CIC. In the meantime I am running all the business expenses and transactions through my sole trader account. So far so good.

In expanding my business I have been investing in it and the money came from my private credit cards and money I made of course. My debt has increased drastically and with it my options to shift it and manage it by myself have reduced dramatically.

Of roughly £1000 - £1200 income per month I currently have to spend about £700 on minimum payments (run out 0% BT rates.) and after a couple of personal blows in autumn and beginning of this year (terminally ill mother back home, flew there to visit, diabetic cat on a free trial in London, petrol costs in Jan/Feb) my cashflow has now ground to a complete halt and I have to micromanage every financial step I take. I sold off some assets to service pending cc payments, but I won't be able to sustain this for more than another month, or two and it is a horrible waste of money.

So, a couple weeks ago I contacted PayPlan and explained my situation. They seem to be one of just a couple of organisations who deal with self-employed people? My first choice was CAP but they don't seem to do self-employed IVAs? Anyone know of any other organisation I should contact to compare options?

The very nice staff at PayPlan carefully listened to my situation and explanations, ran me through a budget and we identified that realistically I can afford to spend around £370 per month to repay my debt. They would highly recommend an IVA since it's a formal arrangement with a more manageable outfall (the default notices issued at the start and cleared within 6 years) but would also support me if I picked a DMP, but explained that the default notices could come any time (even if I don't miss any payments? Is that just a randomised "punishment"?) and that creditors are of course not obliged to freeze interest, etc.

My questions (in no particular order)
My business doesn't currently have a business account and I reckon I need to set this up BEFORE I take any official steps, no?

Also, I am deeply concerned about the impact an IVA or DMP will have on my chances to successfully apply for funding, PayPlan couldn't really help with this in any way and said to contact funders directly and talk to them. Anyone have any experience with this?

My name is on our mortgage, but my husband is paying all out fixed costs, we are hoping to buy a house with a bigger garden at some point, but if that is realistic I don't know. I am worried what impact my IVA or DMP would have on our chances to get a new mortgage.

I am taking assorted steps to increase my income and chances for that are good and there are promising leads, but I am in a place where I will crash very soon and I would love to avoid any missed payments and such like.

I read a few things on this forum about IVAs and DMPs, latter have always struck me as the 'lighter' option, the one that would leave less of a 'black mark' on my records, but now I am not sure about this anymore? It seems either of these will seriously and long-term affect my credit rating.

Has anyone tried for a DMP and if the creditors didn't agree then gone for a IVA?

Also what is the deal with debt being sold on...?! Is that something I should take into consideration or wait for or avoid? How does this impact?

Looking at it all from this angle makes me really angry to think that for YEARS I have been paying the minimum amount and more where I could (hard to top up MBNA payments, they REFUNDED them into my account!!! And Barclay hasn't been any better either!!!! GAH! Shocking!) but I have always been reliable, no missed payments, etc. And that &%$*ng interest is just adding up and adding up and only when you say STOP do they consider freezing it and stop milking you for all it's worth?! Interest is the devil! :mad:

*sigh*

Anyhow, this is where I am at.
I guess my question is what else do I need to do and prepare before taking official steps to help and preserve my business and keep at least SOME options open so I can move...?

Answers on a postcard...?
Love,
Mue x

loveka

A dmp is a completely informal arrangement with your creditors which you could arrange yourself- by phoning them. You explain your circumstances, they probably freeze interest and reduce your monthly payments to what you can afford. You do this as an individual. My understanding of a iva is that household income would be taken into account, but may be wrong.

A dmp effects your credit rating, so it is that that could impact on your mortgage applications in the future, even on the kind of rate you could get on a remortgage.

Have you contacted business debt advice line? They would know the answers to your business related questions.

It sounds to me like a dmp would be better for you. As it's informal the credit card companies don't ask for proof of where your income comes from, so it doesn't matter that you are self employed. If you go through one of the charities they go by the book so self employment could be an issue maybe. Honestly, doing it yourself is so straightforward, a dmp really is no more than being allowed to pay back what you owe within your means without the debt spiralling out of control with more interest.

sourcrates

As above, a DMP is an informal arrangement to repay what you owe, at a lower monthly payment. An IVA is a formal agreement between you and your creditors, there is a business IVA I beleive especially for business debts.
Credit rating goes west with either option, advantage of IVA is that you get legal protection from your creditors, so no court action or selling on of debts.

DMP less formal, you can still be taken to court if creditors choose, and debts can be sold on, possible pain in !!!!.

Acceptance criteria more strick for IVA, must have certain amount of available income for debt repayment.

Best advice, go to National Debtline website (Google is your friend) lots more info on there.

Bonniepurple

Oh Mue ((((())))). I don't normally reply on here, but you are the exeception to the rule. I didn't recognise you until the diabetic cat, and I'd got no idea things were so bad.

You have done wonders with The Owl Tree and I am in awe of you. I've got no advice, but if there's anything I can do please shout. Also, please remember that NM is always available, with supportive members, who might have more ideas than me.

Heather

diekleinemue

Thank you all! This has given me some food for thought! Shall make further enquiries. ^_^

x

National_Debtline

Hi

As Loveka suggested, I think Business Debtline will be the best organisation for you to take advice from at this point.

They don’t purely advise on ‘business debts’, and will be able to advise on your whole situation including personal debt options but from the perspective of you being self-employed.

You can telephone Business Debtline on 0800 197 6026.

www.businessdebtline.org


James
@natdebtline